Mason Drug Co. v. Harris

JAMES C. HILL, Circuit Judge:

In this case we are concerned with an action to recover on a policy of flood insurance issued pursuant to the National Flood Insurance Act of 1968, 42 U.S.C. §§ 4001—4127. Plaintiff Mason Drug Company appeals from a summary judgment and a final dismissal on the merits, with prejudice, in favor of defendant-appellee National Flood Insurers Association (NFIA).1

*887The material facts relative to this case are undisputed. On April 10, 1975, it had been raining for several days in Brewton, Alabama, and flooding was considered a possibility. At approximately 9:00 a. m. on April 10, an agent of the Brewton Insurance Agency was having a cup of coffee with Mason Drug’s president, Mr. Sibert, in the store. Sibert asked about the price of flood insurance, since his store had flooded previously. The agent advised Sibert that he would have to check on the matter and would contact Sibert when he had done so.

Thirty minutes to an hour later, the agent advised Sibert what the premium would be, brought an application to Sibert and had him sign it, and collected the first premium payment. The application stated, under the heading “Important Notices," that the policy would “not cover loss resulting from a flood or mudslide occurrence already in progress on the date of this application.” The application further stated that the policy would provide coverage for a one year period from April 10, 1975, to April 10, 1976. At the bottom of the form, the application stated, “Agent Certifies that following matters have been discussed with insured: (i) that loss already in progress on date of application is not covered.” Sibert was assured by his agent that the policy was effective as of 12:01 on the morning of April 10, there being no waiting period for the policy to go into effect.

By midday on April 10, flooding in downtown Brewton was recognized as a significant possibility. At approximately 2:00 p. m., Sibert began caulking in the store and moving the merchandise to more protected areas. At about 4:00 p. m., Sibert was advised that there would be a flood. By late afternoon, Sibert saw that water had reached within twenty-five yards of the premises and continued to approach the store. Water entered the store at approximately 9:00 p. m. on April 10, and remained there until about 2:00 o’clock of the following afternoon.

NFIA refused to pay for the loss suffered by Mason Drug because the policy expressly excluded loss resulting from a flood which entered the insured’s premises on the date of the application for insurance. This action followed, and Mason Drug appeals from the District Court’s disposition of the case via summary judgment in the appellee’s favor, claiming that there are factual issues as to whether there was a loss in progress at the time the policy was applied for and whether the requirement concerning coverage of a loss in progress on the date of the application was waived.

Where, as here, the language of a contract pertinent to a dispute is unambiguous, the determination of the legal operation of that language is a function for the court and not the jury. West v. Harris, 573 F.2d 873, 877 (5th Cir. 1978), cert. denied, - U.S. -, 99 S.Ct. 1424, 59 L.Ed.2d 635 (1979); Nat Harrison Associates, Inc. v. Gulf States Utilities Co., 491 F.2d 578, 584 (5th Cir. 1974); Gore v. American Motorists Ins. Co., 441 F.2d 10, 11—12 (5th Cir.), cert. denied, 404 U.S. 913, 92 S.Ct. 233, 30 L.Ed.2d 187 (1971). Since this case is before us under the National Flood Insurance Act of 1968, 42 U.S.C. §§ 4001-4127, our conclusion regarding the legal operation of the exclusionary language involved here is controlled by the application of federal law. West v. Harris, 573 F.2d at 881.

Two recent decisions in this circuit have recognized that the “loss-in-progress” principle, by virtue of its recognition in standard insurance law, is applicable to policies issued under the national flood insurance program. Summers v. Harris, 573 F.2d 869 (5th Cir. 1978); Drewett v. Aetna Casualty & Surety Co., 539 F.2d 496 (5th Cir. 1976). The insurer in this case took extra precaution and included the “loss-in-progress” *888principie as an exclusionary clause in the application for insurance. The contract for insurance thus clearly excluded from coverage loss resulting from a flood already in progress on the date of the application. The appellant’s claim that the loss must be in progress at the time the policy was applied for in order for the exclusionary language to apply is contrary to the plain terms of the contract and without merit. That the flood was in progress on April 10, 1975, the date of application, is undisputed. Indeed, the store was flooded on that date. There is also no dispute that the policy was in effect on April 10, 1975. That being the case, all of the provisions of the policy were effective on that date, including the portion which specifically excluded coverage of loss in progress on April 10, the date of application. The loss incurred as a result of the April 10 flood is thus outside the bounds of coverage afforded by the policy.

Mason Drug contends that the policy’s exclusion of loss-in-progress was waived by the agent’s representation to Sibert that a loss occurring on April 10, 1975, would be covered. Under the law in this circuit, the doctrine of waiver cannot be applied to provide coverage where coverage does not exist under, or is excluded by, the policy contract. Kaminer v. Franklin Life Ins. Co., 472 F.2d 1073, 1076-77 (5th Cir.), cert. denied, 414 U.S. 840, 94 S.Ct. 95, 38 L.Ed.2d 77 (1973); Reisman v. New Hampshire Fire Ins. Co., 312 F.2d 17, 20 (5th Cir. 1963); Reliance Ins. Co. v. The Escapade, 280 F.2d 482, 487 (5th Cir. 1960); C. E. Carnes & Co., Inc. v. Employer’s Liability Assurance Corp., 101 F.2d 739, 742 (5th Cir. 1939). The appellant’s waiver argument is therefore inapposite, since application of the doctrine of waiver in this case would result in coverage of loss expressly excluded by the policy.2

The exclusionary provision being clearly set forth in the policy and the doctrine of waiver being inapplicable on these facts, it is immaterial that Sibert claims to have been orally assured that loss occurring on the date of application would be covered under the policy. The District Court was correct in granting summary judgment in the appellee’s favor, and the final dismissal of the case on the merits, with prejudice, in-the appellee’s favor is therefore affirmed.

AFFIRMED.

. Subsequent to the District Court’s dismissal of this case, Patricia Roberts Harris, Secretary of the Department of Housing and Urban Development (HUD), was substituted as party-appellee in the place of the NFIA. The Department of HUD assumed the operation of all of the insurance aspects of the flood insurance program previously performed by the NFIA on January 1, 1978. In conjunction with this un*887dertaking, HUD agreed to assume the defense of pending claims asserted pursuant to policies previously issued by the NFIA. This change in parties has no effect on the rights of these plaintiffs under the policies issued to them. Summers v. Harris, 573 F.2d 869, 870 n.1 (5th Cir. 1978); West v. Harris, 573 F.2d 873, 875 n.1 (5th Cir. 1978).

. The appellee admits that the policy went into effect on April 10, 1975. It also admits that its agent assured Sibert on that date that the policy was then in effect. A logical explanation for these inquiries and assurances is that Sibert and the agent wanted to be sure that the normal fifteen-day waiting period between the date of application and the date a policy is issued had been waived. The NFIA could make insurance available with an immediate effective date where the community had become initially eligible within the preceding thirty days, and it did so in this case. See 24 C.F.R. § 1911.11 (1978). As we noted earlier, however, the policy became immediately effective in toto, and the “loss-in-progress on the date of application” exclusionary provision precluded coverage of the loss claimed by Mason Drug.